 MERTON MODEL FOR ASSESSING THE COST OF CAPITAL, MATHEMATICAL AMOUNT BUT NOT ALSO ECONOMIC AMOUNT OF CAPM AND APT MODELSJournal of Doctoral Research in Economics, 2011, vol. 3, issue 1, 47-61 Abstract: Models for assessing the cost of capital play a central role in substantiating investments decision. These models are often used to evaluate investments in trading securities on the stock market. This paper aims to highlight how a classic model of evaluation, inter-temporal CAPM model, in other words Merton model, can be written mathematically as the sum of two other classic models, CAPM and APT, but the results provided by it does not account for the positive results of the two components models. It is shown in this research that econometric tests of the model, on empirical data, it does not return more accurate results and more rigorous than either of the models used as components. The result of this research is to reveal the error in which the researchers fall when starting to build new econometric models for evaluation combining equations of existing models. Keywords: regression equations; exogenous variables; endogenous variables; heteroskedasticity; probability of occurrence for the null value; error probability (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:aes:jdreco:v:3:y:2011:i:1:p:47-61 Access Statistics for this article More articles in Journal of Doctoral Research in Economics from The Bucharest University of Economic Studies Contact information at EDIRC. |
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